ASSET MANAGEMENT MOVES INTO THE SPOTLIGHT

Enhancing rElationships with policy makErs to dEsign appropriatE invEstmEnt framEworks The current economic recovery is an opportune moment for asset managers to step onto the stage and play a vital role. To do this, they must work hand-in-hand with investors such as pension funds as well as with policy makers who are the drivers behind new regulations. In the new heavily regulated environment, asset managers can benefit from working closely with policy makers to design appropriate investment frameworks that establish a connection between end-lenders and end-investors. If asset management is going to play a central role in the investment industry, policies that support its development are essential. Educatingpolicymakers about theuniqueneeds for financing as well as the demand for investment products could further clarify the role of the asset management industry and deepen the relationship between asset managers and policy makers. For example, we are seeing some positive signs including the European Commission’s recent proposal of a new framework for European Long-Term Investment Funds (ELTIF). See box below.

Additionally, in recognition of the positive impact of businesses with social, ethical and environmental priorities, the European Commission established Social Entrepreneur- ship Funds and European Venture Capital Funds to help investors and social businesses better reap the benefits of the singlemarket. This includes ensuring there are no unintended barriers within EU fund rules to the efficient channelling of investments to social businesses. To bridge the financing gap in the economy, asset managers can leverage their expertise to identify the major barriers for each type of long-term investor. For example, the current regulatory environment often creates unfavourable incen- tives for long-term investment. In particular, accounting rules that are appropriate for investment banks and trading activi- ties do not bode well for investors with a long time horizon, as they encourage short-term investing and even penalise long-term investors.

EUROPEAN LONG-TERM INVESTMENT FUNDS

The ELTIF framework will be available to all types of investors across Europe subject to certain requirements set out in EU law. These requirements include the types of long-term as- sets and firms that the ELTIFs are allowed to invest in (e.g. in- frastructure, transport and sustainable energy projects), how they have to spread their money to reduce risks and the in- formation they have to give to investors. Any ELTIF manager also must comply with all of the stringent requirements of the AIFMD to provide adequate protection for its investors.

On June 26, 2013, the European Commission proposed a new investment fund framework designed for investors looking to put money into companies and projects for the long term. These private European Long-Term Investment Funds (ELTIFs) only invest in businesses that need money to be committed to them for long periods of time.

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